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BTIG Securities analyst Gray Powell said CrowdStrike is one of his favorite stocks.

Dreamstime

CrowdStrike shares are trading lower after BTIG Securities analyst Gray Powell cut his rating on the stock to Neutral from Buy, saying growing competition in endpoint security software could slow down the company’s growth rate.

Some industry players Powell has spoken with noted increased competition for CrowdStrike (ticker: CRWD), in particular from


SentinelOne

(S), he said in a research note. SentinelOne went public in June.

“Our checks lead us to believe that competition is on the rise and that tailwinds to CrowdStrike’s growth in 2022 will downtick from 2021,” Powell said in a research note. He thinks the company’s growth rate will likely slow, leaving investors with the challenge of figuring out how rapidly it will weaken.

With the stock trading at 24 times the sales expected for calendar 2023 as of Friday’s close, he said, investors need to believe the company can sustain growth above 40% through 2025 to justify significant gains in the share price.

“Given our recent fieldwork, we think this view will be more difficult to defend over the near to medium term,” he said. “This is not an easy decision for us because CrowdStrike has long been one of our favorite stocks. Plus, we have a great deal of respect for management and the tremendous success they have achieved in a relatively short period of time. Admittedly, this is somewhat of a judgement call because we continue to see a strong spending environment in CrowdSrtike’s core endpoint target market and success with new products. That said, we think the risk reward favors a Neutral rating.”

CrowdStrike shares wre down 4.5% to $269.10 in mid morning. Earlier, they traded as low at $267.85

Write to Eric J. Savitz at [email protected]

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